Dodgers’ Owners See Return on $2.3 Billion With Acquired Players

By Erik Matuszewski -
Sep 6, 2012

The Los Angeles Dodgers’ new
ownership group is confident about making a return on its record
$2.3 billion investment and the addition of All-Stars Hanley Ramirez, Adrian Gonzalez, Josh Beckett and Carl Crawford fits
into that plan, Chief Executive Officer Stan Kasten said.

“We bought an asset at a unique time,” Kasten said at the
Bloomberg Sports Business Summit hosted by Bloomberg Link in New
York. “It’s an iconic brand, a little bit down on its luck the
last few years, in the second-biggest market in America, in the
media and entertainment capital of the world, with broadcast
rights coming up for bid at a time when media rights are
exploding. That’s an awful lot of good things that work in our
favor.”

The Dodgers were sold in March in a bankruptcy auction to a
group including basketball Hall of Fame player Magic Johnson and
Guggenheim Partners executive Mark Walter. The previous record
price for a Major League Baseball team was the $845 million that
Joe Ricketts, founder of TD Ameritrade Holding Corp., paid for
the Chicago Cubs three years ago.

With their existing broadcast contract with News Corp.’s
Fox expiring after next season, the Dodgers have been aggressive
in adding big-name players since the sale. They added Ramirez in
a trade-deadline deal with the Miami Marlins in July and
acquired Gonzalez, Beckett and Crawford last month from the
Boston Red Sox as part of a nine-player trade.

All-Stars

Those four players have a combined 14 appearances in
baseball’s All-Star Game and are making $74.2 million in salary
among them this season.

“We couldn’t go into that market and tell our fans, ‘We’re
going to do this right, we’re going to do this long term, just
wait for 25 guys to grow into their uniforms,’” Kasten said.
“So we were able to acquire proven stars in the chronological
middle of their careers whom we couldn’t get any other way. This
was a way to improve the team right away while maintaining our
core belief in also building the scouting and player-development
system. That was always part of our model.”

The new ownership is looking to rebuild a franchise that
has won six World Series titles, tied for fifth-most in
baseball. The team, which won its last championship in 1988, is
in second place in the National League West division, 4 1/2
games behind the San Francisco Giants.

The Dodgers’ record sale price was driven in part by the
value of its next broadcast contract.

Bundle Deal

“One way to look at it was that it was the sale of the
Dodgers and a hypothetical (regional sports network) in one
bundle,” Bruce Bennett, a partner at Jones Day, said at the
Bloomberg Sports Business Summit. Bennett was the lead lawyer
for the Dodgers in the sale.

The competition for sports programming, which is live and
reaches a target demographic for advertisers of men age 18-34
years old, is driving up the price companies are willing to pay
for media rights. Sports economist Andrew Zimbalist of Smith
College in Northampton, Massachusetts, is among those predicting
a heated bidding process for the Dodgers’ rights between Fox
Sports and Time Warner Cable Inc. No talks with a rival to Fox
are allowed until after November.

Kasten said the Dodgers are seeing strong support from
customers, new sponsors, “strategic partners looking to align
with our platform” and media partners. It gives ownership
confidence as it seeks to restore the brand of one of the most
iconic teams in professional sports, Kasten said.

“We think all of those things are going to work to put
together a healthy economic picture with ample justification for
the price,” he said.